Draft Security Agreement

---
name: draft-security-agreement-whole-business
task_id: structured-finance-securitization/draft-security-agreement
description: Drafting a security agreement for a whole business securitization where the collateral includes operating contracts, intellectual property, deposit accounts, and equipment, requiring layered cash management mechanics, perfection steps for each collateral type, and identification of pre-existing lien and consent issues before closing.
activates_for: [planner, solver, checker]
---

# Skill: Draft Security Agreement for Whole Business Securitization Collateral Perfection

## 1. Subject-matter triage

- Treat the assignment as primary-document drafting, not a memo exercise: produce the security agreement first, then any ancillary notes only if needed.
- Read the deal documents for the asset perimeter, account structure, lien status, and consent dependencies before drafting operative provisions.
- Identify whether the collateral package is broad-form “substantially all assets” or if carveouts, excluded property, or special-purpose accounts require tighter drafting.
- If multiple asset classes or account types appear, map each one before drafting to avoid leaving any perfection step or control mechanic implicit.

## 2. Failure modes the skill is correcting

- Drafting a generic security grant that fails to track the transaction’s operating assets, proceeds, and collateral-specific perfection mechanics.
- Collapsing separate cash-management regimes into one vague sweep concept and thereby obscuring trigger levels, activation timing, and operational consequences.
- Omitting how security is perfected in deposit accounts, general intangibles, equipment, and registered intellectual property under the governing UCC framework.
- Ignoring anti-assignment language in operating contracts or other restrictive covenants that must be addressed for a security interest to be effective.
- Failing to surface pre-existing liens, fixture issues, or equipment encumbrances that must be released, bonded, or expressly tolerated as permitted liens.
- Leaving control agreements, special-purpose accounts, or collection-account designations as informal drafting notes instead of operative closing deliverables.
- Stating insurance covenants in generic terms without tying coverage scope, limits, and notice obligations to the collateral and the transaction structure.
- Drafting conclusions about lien validity or perfection without naming the statutory or contractual authority that supports the position.

## 3. Legal frameworks / domain conventions that apply

- Article 9 of the Uniform Commercial Code governs the security interest in most personal-property collateral, including general intangibles, equipment, inventory, and proceeds; perfection mechanics vary by collateral type.
- Deposit accounts are typically perfected by control rather than by filing alone; control agreements are usually treated as closing deliverables for accounts that matter to the cash waterfall.
- Registered intellectual property may require financing-statement coverage plus separate recording steps in the applicable federal or registry system; non-registered IP and know-how are handled as general intangibles.
- Anti-assignment restrictions in operating contracts and similar agreements may be limited by UCC and applicable non-UCC overrides; the drafting should state the intended effect without overclaiming.
- Cash trapping and rapid amortization are distinct cash-management states and should be drafted as separate regimes with clear triggers, duration, and consequences.
- Special-purpose, escrow, tax, reserve, or collection accounts should be described separately so the secured party’s rights and the grantor’s use limitations are not implied by a general account grant.
- Fixtures and equipment can be affected by real-property liens or lessor interests; the security agreement should distinguish property owned outright from property subject to another party’s superior rights.
- Insurance undertakings should identify required coverages, minimum limits, lenders’ loss payee or additional insured status where appropriate, and notice of lapse or material change.
- When the transaction documents identify conditions precedent, treat them as operative closing mechanics in the security agreement or related closing deliverables.
- Cite the controlling authority for each legal proposition used, such as UCC Article 9 provisions, applicable anti-assignment override rules, and any transaction-specific contractual consent framework.

## 4. Analytical scaffolds

1. Collateral inventory: build the grant around each collateral class actually used in the transaction — operating contracts, IP, deposit accounts, equipment, inventory, general intangibles, instruments, chattel paper, documents, fixtures if applicable, and proceeds.
2. Perfection path by collateral type: for each class, specify the method of attachment/perfection, any needed filing or recording, and any closing deliverable that makes perfection effective.
3. Contract-rights analysis: flag provisions restricting assignment, sublicensing, or pledge; preserve the security grant while respecting statutory or contractual limits on enforcement.
4. Cash-management architecture: draft separate mechanics for ordinary control, cash trapping, and rapid amortization, with distinct triggers and a clear handoff between regimes.
5. Deposit-account control: identify every account needing a control agreement, and align the account description with the waterfall, reserve mechanics, and any use restrictions.
6. IP treatment: separate registered rights from unregistered rights and know-how, and match the collateral description to the correct filing or recordation route.
7. Lien review: convert diligence findings into drafting outcomes — release, subordination, permitted-lien carveout, or closing condition.
8. Fixture and equipment issues: test whether any item is subject to landlord, lessor, or mortgage-related claims, and draft the grant and exclusions accordingly.
9. Insurance package: align required coverages and notice mechanics to the collateral base, transaction risk profile, and any named secured-party interests.
10. Closing mechanics: turn all necessary releases, consents, control agreements, and recordations into express closing conditions or operative covenants.
11. Authority support: when stating a perfection or enforceability proposition, identify the governing UCC section, federal recording rule, or other controlling authority in the drafting note or clause reference.
12. Drafting discipline: keep the operative agreement tight, but use schedules for asset lists, account lists, IP lists, and identified lien issues so the main document stays modular.

## 5. Vertical / structural / temporal relationships

- If cash trapping is triggered first and performance later deteriorates further, the transition to rapid amortization must be expressly sequenced so there is no gap in sweep authority or waterfall operation.
- If a deposit account is both controlled and subject to restricted use, the control terms must preserve the restriction rather than granting unrestricted dominion.
- If a consent is needed for pledge effectiveness or enforcement, place it in the closing mechanics rather than assuming a boilerplate grant cures the issue.
- If a lien affects both equipment and fixtures, address the two property types separately because the governing perfection and priority analysis may differ.
- If an asset appears in more than one schedule or deliverable, use the same naming convention across the agreement, schedules, and closing checklist to avoid mismatch.

## 6. Output structure conventions

- Draft the security agreement as a complete operative document with defined terms, grant of security interest, representations, covenants, perfection and further assurances, cash-management provisions, insurance, remedies, and miscellaneous terms.
- Use schedules for collateral inventories, intellectual property listings, account listings, and identified liens or consent items; do not bury these in the body.
- Include a closing-conditions section or closing checklist integrated into the agreement if the transaction documents require pre-closing releases, control agreements, or recordations.
- Add a drafting-notes or issue-tracking appendix only if needed to flag unresolved diligence items, with each item tied to its legal consequence and recommended resolution.
- Keep the file output as the requested `security-agreement.docx`, and ensure the document contains operative clauses rather than a summary of what should be drafted.